About the Authors
Introduction John Robson and Owen Lippert

1  The American Experience

A Canadian Litigator Looks at the American System D. Geoffrey Cowper
How America Got Its Litigation Explosion: Why Canada Should Not Consider Itself Immune Walter Olson
Scientific Knowledge and the American Federal Courts Kenneth R. Foster and Peter W. Huber
Lessons from the American Experience David E. Bernstein

2  The Canadian Challenge

Class Actions in Canada S. Gordon McKee
Dow Corning Breast Implant Action Richard A. Hazleton
Some Economics of the Canadian Legal Profession Stephen T. Easton
Civil Liability in Canada: No Tip, No Iceberg Bruce Feldthusen
Civil Justice Reform in Ontario Charles Harnick
Is Canada Inheriting America's Litigious Legacy? Roy McMurtry
Canadian Economic Regulation: Balancing Efficiency and Fair Process Konrad von Finckenstein
An Environmental Right to Sue Mark Mattson
Will We Be Back in Five Years? The Report of the Canadian Bar Association Task Force Seymour B. Trachimovsky

3  The State of Canadian Judicial Statistics

Trends in Canadian Civil Justice Owen Lippert, Stephen Easton, and Craig Yirush

Copyright (c) 1997 by The Fraser Institute. All rights reserved. No part of this book may be reproduced in any manner whatsoever without written permission except in the case of brief quotations embodied in critical articles and reviews.

The authors of this book have worked independently and opinions expressed by them are, therefore, their own, and do not necessarily reflect the opinions of the members or the trustees of The Fraser Institute.

Printed in Canada.

Canadian Cataloguing in Publication Data

Main entry under title:
Law and markets

Includes bibliographical references.
ISBN 0-88975-180-3

1. Liability (Law)-Canada. 2. Actions and defenses-Canada.

3. Dispute resolution (Law)-Canada. I. Robson, John Sinclair Petifer. II. Lippert, Owen. III. Fraser Institute
(Vancouver, B.C.)

KE484.L5L38 1997 346.71'022 C97-910730-X
KF450.L5L38 1997

About the Authors

David E. Bernstein is assistant professor at George Mason University School of Law, where he teaches Evidence and related subjects. Professor Bernstein is a graduate of Yale Law School and has served as a Research Fellow at Columbia University School of Law. He is co-editor of Phantom Risk: Scientific Inference and the Law (MIT Press 1993) and has written about tort reform and related issues for the Wall Street Journal, the Product Safety and Liability Reporter, the Yale Journal of International Law, the Review of Litigation, Regulation, and other publications.

D. Geoffrey Cowper, Q.C., received his LL.B. from the University of British Columbia in 1980 and was admitted to the British Columbia Bar in 1982 following a one year clerkship with the Supreme Court of Canada. He practises in the area of general litigation, with an emphasis on commercial and corporate disputes, but including a variety of areas such as professional negligence, insurance law, fiduciary duty, administrative and constitutional law. Mr. Cowper has appeared before all levels of Courts in Canada and before many administrative and quasi-judicial bodies.

Stephen T. Easton is professor of Economics at Simon Fraser University. He received his A.B. from Oberlin College in 1970 and an A.M. in 1972 and a Ph.D. in 1978 from the University of Chicago. He has published extensively; recent publications include Rating Global Economic Freedom (with Michael Walker, Fraser Institute 1992); Education in Canada: An Analysis of Elementary, Secondary and Vocational Schooling (Fraser Institute 1988; 2nd ed. forthcoming); Legal Aid Efficiency: Cost and Competitiveness (with P.J. Brantingham and P.L. Brantingham, Queen's University 1994). Professor Easton was an associate editor for Economic Inquiry from 1980 to 1984, on the board of editors for the Canadian Journal of Economics from 1984 to 1987, organizer for the Canadian Economics Association's Canada-France Roundtable in 1988 and representative for the Canadian Economics Association to the Social Science Federation of Canada Aid to Scholarly Publications from 1991 to 1994. He is a senior research fellow of The Fraser Institute.

Bruce Feldthusen is a graduate of Queen's University (Sociology and Economics), the University of Western Ontario (Law), and University of Michigan (S.J.D.). He has been a professor of law at the University of Western Ontario since 1977, and was a visiting scholar during 1981/2 at the University of California, Berkeley and visiting professor during 1992/3 at the University of Arizona. Professor Feldthusen specializes in the law of Torts, particularly the commercial tort law governing recovery for pure economic loss; and the law of Remedies, especially personal injury compensation and punitive damages. His relevant recent publications include: Economic Negligence (1994); Cases and Materials on The Law of Torts (1996); Punitive Damages in Canada: Can The Coffee Ever be Too Hot? (1995); and, with John Palmer, Economic Analysis in the Supreme Court of Canada (1995).

Kenneth R. Foster is associate professor of Bioengineering at the University of Pennsylvania. Since the receipt of his Ph.D. in 1971, Dr. Foster has been engaged in studies related to medical uses of radio-frequency energy. In addition, he has written widely about scientific issues related to possible health risks of electromagnetic fields. He has published approximately 80 technical papers in peer-reviewed journals and numerous other articles, both in technical scientific and lay-oriented journals. He is coauthor with Peter Huber of Phantom Risk: Scientific Inference and the Law (MIT Press 1993) and Judging Science (MIT Press 1997). He is a fellow of the Institute of Electrical and Electronics Engineers (IEEE), vice chair (chair elect) of the IEEE, Engineering in Medicine and Biology Society (EMBS) Committee on Man and Radiation (COMAR), and president of the IEEE Society on Social Implications of Technology.

The Honourable Charles Harnick became Ontario's thirty-fifth attorney general on June 26, 1995. He is also the minister responsible for Native Affairs. Mr. Harnick was first elected member of the provincial legislative assembly for the Willowdale constituency in 1990 and acted as the Progressive Conservative's critic of the ministry of the Attorney General and the Native Affairs Secretariat, and served on the Standing Committee on the Administration of Justice during his time as a member of the opposition. In the early 1990s, he was also a member of the Select Committee on Ontario in Confederation, where he had an opportunity to increase his understanding of native and constitutional issues. After receiving his undergraduate degree in political science at York University, Mr. Harnick attended the faculty of Law at the University of Windsor. Called to the Bar in 1977, he practised civil litigation and, in 1992, was appointed a specialist in civil litigation by the Law Society of Upper Canada. Mr. Harnick is a member of the Canadian Bar Association, the Advocates Society and the Medico-Legal Society of Toronto, and has been involved with the Toronto and District Chapter of the Kidney Foundation of Canada.

Richard A. Hazleton was hired by Dow Corning in 1965 and has held several positions in Process Engineering, Finance, and Manufacturing and Engineering, including assignments in Europe. He became president of Dow Corning Europe in 1991, a director of Dow Corning in 1992, president and CEO of Dow Corning in 1993, and chairman and CEO in 1994. Mr. Hazelton holds a B.S. and M.S. in chemical engineering from Purdue University, and an M.B.A. from Central Michigan University. He is also a director of the Chemical Manufacturers Association and of the Chemical Bank & Trust Company.

Mr. Hazleton became CEO of Dow Corning in the midst of the silicone breast implant controversy. Since then, he has had the opportunity to discuss his company's involvement in that issue and to publish his views on legal reform in testimony before Congress and in many forums, including the National Institute of Health's conference on biomaterials availability, a conference of the Association for Ethics in Economics, and business-school classes in crisis management. His media appearances on the issue have ranged from PBS's Frontline to the Oprah Winfrey Show.

Peter W. Huber is a lawyer and writer. He earned a doctorate in Mechanical Engineering from MIT, and served as assistant and later associate professor at MIT for six years. He has a LL.B. from Harvard Law School and clerked on the District of Columbia Circuit Court of Appeals for Judge Ruth Bader Ginsburg and, then, on the US Supreme Court for Justice Sandra Day O'Connor. He is a senior fellow of the Manhattan Institute for Policy Research and serves as counsel to the law firm of Kellogg, Huber, Hansen, Todd & Evans in Washington, DC.

Dr. Huber's professional expertise is in liability law and safety regulation. He writes a regular column for Forbes and his articles have appeared in scholarly journals (including the Harvard Law Review and the Yale Law Journal), magazines (The New Republic, Science, Scientific American, Regulation) and many newspapers. He has appeared on Face the Nation, the McNeil-Lehrer News Hour, and numerous other television and radio programs.

Owen Lippert holds a Ph.D. in Modern European History from the University of Notre Dame, Indiana. Following his graduation in 1983, he worked as managing editor for the Asia and World Institute in Taipei, Taiwan. Returning to Canada in 1984, he worked first as a caucus researcher for the Social Credit government and, then as a policy analyst for the Office of the Premier until 1991. He joined the staff of Kim Campbell as press secretary during Campbell's tenure as attorney general of Canada and minister of Justice. In 1993, while an advisor during Campbell's leadership campaign, he taught at Carleton University and the University of British Columbia and he was a senior policy advisor in Industry and Science Canada during Campbell's tenure as Prime Minister. In 1994, Dr. Lippert worked on contract for the Canadian department of Justice before going to work as a senior policy analyst at The Fraser Institute in Vancouver, British Columbia. In 1996, he joined the Editorial Board of The Globe & Mail in Toronto. His specialties are public policy and legal reform.

The Honourable Roy McMurtry, after receiving an honours degree in History at the University of Toronto, took his law degree at Osgoode Hall and was called to the Ontario Bar in 1958. He practised as a trial lawyer for 17 years before election to the Ontario Legislature and appointment as attorney general of Ontario in 1975. He held this post until 1985, and was also solicitor general from 1978 to 1982. In 1985, Mr. McMurtry became Canada's high commissioner (ambassador) to Britain. Upon his return in 1988, he served as chairman and CEO of the Canadian Football League and practised law in Toronto until his appointment as associate chief justice of the Ontario Court of Justice in 1991. On February 3, 1994, following the retirement of former Chief Justice Callaghan, Mr. McMurtry was appointed the chief justice of the Ontario Court of Justice and, on February 20, 1996, he became the chief justice of Ontario.

Mark Mattson is a litigator with experience in many forums, including the Ontario Provincial and General Division courts, the Canadian Immigration and Appeal Board, the Ontario Racing Commission, the Canadian and Ontario Parole Boards, the International Water Tribunal (Amsterdam), the Ontario Energy Board, the Environmental Assessment Board, and the Ontario Municipal Board. In recent years, the focus of his practice has been environmental law, representing public interest groups such as Environment Probe, Energy Probe, SCAT, and Probe International. In 1992, Mr. Mattson was a committee member of the Ontario Environmental Bill of Rights Advisory Group.

S. Gordon McKee is a partner in the litigation department at Blake, Cassels & Graydon in Toronto. He has practised exclusively in civil litigation since his call to the Ontario Bar in 1988, with emphasis on product liability, corporate commercial, professional negligence, and securities litigation, and has represented and advised various clients with respect to proceedings under the Ontario Class Proceedings Act. Mr. McKee has published articles in Canadian Corporate Counsel, Mealey's Litigation Reports, the Canadian Journal of Insurance Law and Business and the Law; he has also been a frequent speaker at continuing education conferences and seminars. He is a member of the Advocates Society and serves on the Advocates Society's Rules Committee. He has been a guest lecturer at the Osgoode Hall Law School Trial Advocacy Program and the Insurance Law course at York University (Osgoode Hall Law School) for a number of years.

Walter Olson is the author of The Litigation Explosion (1991), a widely discussed book on the excesses of the American legal system. He also wrote the newly published The Excuse Factory: How Employment Law is Paralyzing the American Workplace. He has testified before both houses of the United States Congress, spoken to the Harvard Law School and the National Press Club, and appeared on MacNeil-Lehrer, Donahue and Oprah. He is a senior fellow at the Manhattan Institute. His writings appear regularly in publications such as the Wall Street Journal, the Washington Post, the New York Times, the Baltimore Sun, Reason, and Commentary. He graduated from Yale in 1975.

Seymour B. Trachimovsky is general counsel and corporate secretary of DuPont Canada. He was called to the Bar (Ontario) in 1975 after graduating from McGill University with a LL.B. in 1973. Mr. Trachimovsky received his B.Eng. (chemical) from McGill University in 1966, an M.B.A. from York University with a major in Finance in 1984, and LL.M. in tax policy from Osgoode Hall Law School in 1990. His thesis for the tax policy program was entitled Leveraged Buy-Outs and the Tax Policy Stalemate. Trachimovsky has been active in the Canadian Manufacturers Association, serving on its Board and as the chairman of its Legislation Committee. He has spoken at conferences on product liability, environmental law, competition law, and on other matters of interest to corporate counsel. Mr. Trachimovsky presently serves on the Canadian Bar Association Task Force on Civil Justice, which recently issued a report recommending significant changes to the Canadian system of justice in order to enhance access.

Konrad von Finckenstein was appointed the director of Investigation and Research, Competition Bureau, Industry Canada in February 1997. He received his B.A. (Hons.) in Political Science from Carleton University in 1968, was called to the bar in Ontario in 1971, and received his Q.C. in 1984.

Prior to his appointment as director of Investigation and Research, Mr. von Finckenstein was, from 1994 to 1997, the assistant deputy minister, Business Law, Industry Canada. From 1990 to 1994, he was assistant deputy attorney general, Tax Law, in the department of Justice, where he coordinated the implementation of the North American Free Trade Agreement. From 1988 to 1989, Mr. von Finckenstein was assistant deputy minister, Trade Law, in the department of Justice; from 1987 to 1988, senior general counsel, Trade Negotiations Office; from 1982 to 1986, senior general counsel, department of Regional Industrial Expansion; from 1979 to 1981, director, Commercial Law Division, in the department of Justice, and, from 1979 to 1978, legal advisor, Property and Commercial Law Section, in the department of Justice.

Craig Yirush is a Ph.D. student in American History at The Johns Hopkins University, where he is studying the political thought of the American colonies in the eighteen century. He received an M.A.(1992) and a B.A. (1990) in History from the University of British Columbia and an M.Phil. (1995) in Political Thought and Intellectual History from the University of Cambridge. He has published articles in the Canadian Student Review, Fraser Forum, and the St. John Telegraph Journal.

Since 1991, Yirush has attended many student seminars organized by The Fraser Institute, including the 1994 Student Leaders' Colloquium. In 1995, he was the Hunter Family Foundation student intern at The Fraser Institute and returned there in 1997 as the Margaret Thatcher student intern. He has received numerous awards, including a University Graduate Fellowship, University of British Columbia (1992-94); the Claude R. Lambe Fellowship, Institute of Humane Studies (1994); the Humane Studies Fellowship, Institute for Humane Studies (1996); and the Graduate Fellowship, The Johns Hopkins University (1996-97).


Introduction

Law and Markets

John Robson and Owen Lippert

Governments function both as rule-makers and as providers of services to assist people in resolving their disputes under those rules. They must both make good rules and ensure that disputes are resolved efficiently and fairly.

When one thinks of the law and legal system, one usually thinks first of the more spectacular aspects of criminal law such as murder, rape, and arson. While instances of overt acts of aggression and the subsequent courtroom proceedings are dramatic, most legal activity involves civil cases. These are cases in which one private citizen alleges that another private citizen has failed to uphold the explicit or implicit terms of a contract. Most of us will neither deliberately burn down a restaurant nor be murdered, but we buy, sell, rent and promise almost every day.

All the laws and courts in the world will not stop disputes. Disagreements over contracts are an inevitable by-product of error, misunderstanding, larceny and the ease with which the human tendency to be more solicitous of our own rights than those of others. Civil courts and their proceedings are a necessary, desirable and, indeed, integral part of a functioning market economy.

A balance needs to be struck between the expeditious resolution of legitimate suits and the prevention or discouragement of unjustified ones: both rules of contract and of dispute settlement should be designed to this end. Particularly, the dispute resolution processes ought to aim at securing as many legitimate rights as possible, without becoming so complex and time-consuming that even a vindicated party fritters away most of what they recover prosecuting their suit.

Traditionally, the law has permitted wide latitude to parties to contract as they see fit. It imposed "reasonable person" standards in resolving disputes over whether a contract had been fulfilled, and also over what terms should be assumed to be implicitly present in a contract in areas where no explicit provisions were present. The resulting system, while not perfect, has functioned fairly well.

Over the past few decades in Canada, however, there has been an extraordinary proliferation of new legal rules and new kinds of legal rules, most of it concerned with regulatory or administrative tort law. It is time to start looking at the effect that these have had.

Rules and their enforcement

Given the impact on our lives of both statute and common law concerning private conduct and the kinds of private agreements that citizens can make, it is important to focus on developing cost-effective rules, and on making them clear. But it is no less important to create an efficient process for enforcing these rules and for settling legal disputes between private parties.

If risks and responsibilities are unfairly distributed, contracts will not be made at all. If they are not clearly stated, contracts will be made, but unnecessary disputes will arise. And if the process of dispute resolution is somehow inadequate-too slow, expensive, or arbitrary-then the benefits we ought to derive from the formal contract rights we do possess are not in fact available.

Freedom of contract is determined partly by mutual consent and partly by limitations imposed by law that may not be waived even by mutual consent. And, of course, because different jurisdictions impose different rules, those who enter into apparently identical contracts, such as manufacturers and purchasers of a particular product, can face different liability in different places. But another factor, though less obvious, is no less conclusive. Freedom of contract is also in practice limited partly by what actually happens when a dispute arises as to the terms of a contract or their fulfilment. The performance of legal institutions matters often as much as legal rules.

How the law and the legal system influence and possibly harm the workings of the market economy is not just important; it is timely. There are, at least, anecdotal indications that something in the United States with respect to the formal rules of contract and the process of private dispute settlement has gone badly wrong. Between bad or unclear rules and inconsistent processes for resolving disputes, many distinguished American observers have concluded that there are too many lawsuits (for too much money) and too many jury awards. The results of court action are, too often, detached from the facts presented, the law, or even the scale of damages for which compensation is sought. Some Canadian observers now fear that this American malady may be incubating in Canada.

No reasonable person can fail to be alarmed at the apparent state of jurisprudence in the United States, nor at the possibility that such problems could spread to Canada. Naturally, we are not in danger of adopting the American system in its entirety, not least because it is based on very different constitutional foundations. But if America's legal problems are as bad as they seem, and if we incorporate a large number of their unwise rules and habits into our own judiciary system, then it is conceivable that we will face the same kinds of difficulties.

Structure of the book

As a result of our concern with this possibility, The Fraser Institute, together with the Manhattan Institute, convened the conference, Law and Markets: Is Canada Inheriting America's Litigious Legacy?, in Toronto, Canada on November 21, 1996. Experts on various aspects of this situation were invited to come and give us their views. It is our pleasure to present their papers in this volume. Though they presented a variety of views, all agreed that the daunting complexity of the topic must not deter us from a coherent investigation of it. As this is a preliminary airing of ideas, it touches on some topics while neglecting others, but our work will be well done if its impact is to persuade readers of the importance of the topic and of the need for further investigation of it.

Our first section, The American Experience, deals with what has gone wrong in the United States, both in its consequences and in its causes. In "A Canadian Litigator Looks at the American System," Canadian lawyer Geoff Cowper recounts in detail one of the strangest and most spectacular recent American cases, in which a confused jury and tortuous legal rules combined to produce a $500 million award against a firm over a transaction whose total value was not more than $8 million. In "How America Got Its Litigation Explosion and Why Canada Should Not Consider Itself Immune," Walter Olson, senior fellow at the Manhattan Institute, attempts to explain which American legal rules have produced the bizarre and counterproductive results apparent in the United States today.

There are many ways in which the dispute settlement process can go awry. It can do so because a lot of rules are slightly wrong, because a few rules are very wrong, or because a lot of rules are very wrong. In "Scientific Knowledge and the American Federal Courts," Olson's colleague Peter Huber, also a senior fellow at the Manhattan Institute, and his collaborator Kenneth Foster suggest that major flaws in one rule concerning scientific testimony in civil cases are responsible for much of the spectacular recent mischief. They also describe measures underway in American courts to bring this problem under control. Finally, in "Lessons from the American Experience," David Bernstein, professor of Law at George Mason University, suggests the lessons that Canadians can draw from the American experience, particularly about which rules to change or not to change if we seek to avoid a litigation explosion here.

In our second section, The Canadian Challenge, we ask whether such an explosion actually is already under way in Canada. Are the symptoms starting to appear, in the form of the kind of bizarre results with which Americans are all to familiar? Are we already making the kinds of rule changes that Olson and Bernstein warn us against and, if so, are they producing the results they fear? Are we moving in quite a different direction? And just how alarming are the similarities?

In "Class Actions in Canada," Gordon McKee of Blake, Cassels and Graydon discusses some important changes that have been made in Canadian litigation law, and expresses cautious optimism that these do not closely parallel those south of the border either in structure or in outcome.

Litigation explosions, as we have seen, can result from unwise rule changes, and such changes can have many sources. One potential source of trouble is a self-regulated legal profession trying to maximize its income through output. In "Dow Corning Breast Implant Action," the chairman of Dow Corning, Richard A. Hazleton, gives an insider's view on how legal rules can create an industry ("Litigation, Inc.") devoted to launching enough lawsuits to guarantee that the attorney, if not the plaintiff, hits the jackpot. Then, in "Some Economics of the Canadian Legal Profession," economist Stephen T. Easton from Simon Fraser University surveys the state of the legal profession in Canada and warns that we are now producing lawyers in Canada at a higher rate than in the United States. This contributes to the possibility that we, too, will encounter pressure from the profession to change the rules to permit more litigation.

In "Civil Liability In Canada: No Tip, No Iceberg," however, Bruce Feldthusen of the University of Western Ontario argues that what is happening in Canada has little to do with the American experience, which he also says is not nearly as extensive as anecdotal horror stories would imply. He suggests that the real problem lies with the entire system of liability itself. Its high private transaction costs, he maintains, make it an inefficient way to deter unsafe products and actions.

This brings us to the question of what we ought to be doing, either to halt an explosion if it is happening or to prevent one if it is looming. What ought we to be doing to improve the existing system even if it already works fairly well, and to anticipate future changes? In "Civil Justice Reform in Ontario," Charles Harnick, attorney general for Ontario, notes a greater increase in litigation in Ontario than the machinery of justice can handle. He argues that the problem and the solution are primarily technological and administrative. More prosperity means more contracts and a faster pace of commerce, which inevitably brings more disputes over contracts and a need for their speedier resolution. The justice system has lagged behind the private sector, and must be brought up to the speed of business. Harnick also suggests one significant addition to existing rules: he champions the implementation of effective Alternative Dispute Resolution procedures in order to avoid taking many disputes to full trial. In "Is Canada Inheriting America's Litigious Legacy?" another practitioner, Ontario Chief Justice Roy McMurtry, an outspoken critic of delays, offers his own views on clearing up the backlog. Among the measures he suggests is that politicians and citizens must not regard the justice system as "just another social program," but should treat it-and fund it-as the foundation of good government.

As government grows larger, so too does the number of situations in which governments-essentially as private parties-confront citizens in civil proceedings. In "Canadian Economic Regulation: Balancing Efficiency and Fair Process," Konrad von Finckenstein, director of Investigation and Research, Competition Bureau, Industry Canada, describes some of the processes currently in place for handling such disputes both in the courts and through alternative channels. His view is that a uniquely Canadian balance between efficiency and procedural fairness has been struck, and that we should seek to refine it, rather than overthrow it.

In "An Environmental Right to Sue," Mark Mattson, attorney for Environment Probe, suggests that not all rule changes are undesirable, even though they may increase litigation in an overburdened system. He contends that some corrective actions may deliberately or accidentally advance or retard cases in contradiction to stated public policy goals. Mattson denies that right-to-sue innovations under consideration by the federal government are as dangerous as some commentators charge. He argues that, on the contrary, these proposed changes do not go far enough.

In "Will We Be Back in Five Years? The Report of the Canadian Bar Association Task Force," Seymour Trachimovsky, the general counsel for DuPont Canada, looks at the Canadian Bar Association's own study of the problems facing Canada's civil justice system. He concludes that the problem is far from under control and that in five years' time the profession will be back for another look at a problem that may, by then, be far more serious.

In the third section, The State of Canadian Judicial Statistics, our final group of authors-Owen Lippert and Craig Yirush of The Fraser Institute and Stephen Easton of Simon Fraser University-attempt to peer forward through the fog. In "Trends in Canadian Civil Justice," they find that visibility is severely impaired due to a lack of basic data and argue that whatever areas may require further examination, such an effort requires more complete, more reliable, and more detailed information on what is happening now.

Peering forward through the fog

This volume, drawn from our initial conference, represents the first step in an ongoing investigation. In order to look forward we need also to step back and gaze over the landscape. This will be the goal of the Fraser Institute's Law and Markets project.

Our efforts will involve examining how the law and legal system has already affected, or has the potential to affect, the efficient workings of our largely market economy. For instance, in intervening so massively in private arrangements, have governments given to the courts and to juries tasks with which they cannot cope? At one time courts and juries examined contracts and judged their fulfillment against a few clear and fundamental rules of common law. Now the judiciary increasingly must determine whether the fulfillment of contested contracts meets the conditions laid out in a voluminous and painfully obscure body of statute law and an even larger and more obscure body of regulations derived from that law. Judges and juries, many suspect, now lack the sustained expertise necessary to make consistent judgements.

Have we already reached the point prophesied by Friedrich Hayek, in which a network of legally mandated rules has become so dense and complex that regardless of their individual merits they create massive uncertainty for all, including grave uncertainty whether natural justice will be served through a transparent process? Certainly the growing tendency of legislation not to make rules, but to create and empower regulatory agencies is a sign of unmanageable complexity.

The Law and Markets project will also ask whether recent and proposed legislative changes to, for instance, securities law, may erode the efficient workings of common law principles and impair the opportunities for cooperation and contract. We will also explore the impact of very specific rules such as class action legislation or contingency fee legislation on the existing Canadian legal system. Finally, we hope to bring an economic perspective to the ever-changing world of legal rules in order to provide advice on how Canada could efficiently maximize wealth and ensure fairness in a non-coercive legal framework.

This book represents only the beginning of an examination of these and other questions. Clearly we need to know whether our laws and legal system have induced private citizens to devote more energy and resources to battles over the fulfillment of existing contracts and less to making and fulfilling mutually satisfactory ones. If they have, we need to know why. Certainly one question is whether the current dispute resolution process is becoming more of the problem and less of the solution. As we examine these questions over the next two years, we encourage others to do so as well and to share their results with us. The evidence presented in this volume makes a sufficient case that a problem exists. Serious thought is needed to understand it and to find remedies.

As always the authors have worked independently and their views do not necessarily represent the views of The Fraser Institute or of its trustees and members.

Law and Markets project

The Institute launched the Law and Markets project in the summer of 1996 in order to examine the economic consequences, current and future, of Canada's laws and legal system. The Fraser Institute has long had a strong interest in the Rule of Law and the efficiency of the legal system as critical factors in the growth of a market economy. The director of the project is Owen Lippert, a Senior Policy Analyst with the Institute since 1994. Under the aegis of the Law and Markets project, numerous articles appeared in 1996 in such publications as The Financial Post, The Globe and Mail, Canadian Lawyer magazine and the Sterling chain of newspapers.

In the years ahead, the Law and Markets project will begin to bring forth interesting and engaging facts and analyses from several scholars and researchers. Professors Steven Easton and Paul Brantingham of Simon Fraser University will direct the research in criminal law topics, including an update of their highly successful 1996 publication, "The Crime Bill: Who Pays." Professor Steven Globerman, also of Simon Fraser University, will direct the research on civil law topics. To provide guidance and comment, an advisory board of eminent practitioners and scholars has been formed.

The area of the law and the legal system is a rich and varied one. We look forward to contributing a much-needed economic perspective to the emerging debate over the primary ordering of Canada's economy and society.

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